Companies Amendment Bill: proposed amendments to Clauses 83 to 119

Meeting report

Deliberations on the Department’s proposals
The Committee deliberated on the Department’s proposed Amendments.

Clause 83
Mr J Smalle (DA) made suggestions for this clause. Later on in the meeting Ms Kathy Idesohn, consultant from UCT’s Commercial Law Department clarified the proposed amendments which were accepted.

Clause 84
Mr Smalle wanted to know what qualifications were required of Business Practitioners. Would the qualifications be stipulated in the regulations to protect against practitioners not having the technical background to nurse a company back to health? He proposed that they have a minimum of five years experience.

Mr Rory Voller, Director - Legal and Regulatory Services, Department of Trade and Industry, said that qualifications had been factored into the regulations. The practitioners would be grouped into junior and senior practitioners and there would be cases where there were dual appointments of junior and senior practitioners.

Mr A Alberts (Freedom Front Plus) said that the definition in 84(a)(i) would exclude all advocates as they were regulated by the Bar which was not a regulatory authority.

Mr Voller said that it was a valid point and would be reviewed.

New Clause
A new Clause was introduced after Clause 85 amending Section 140 of Act 71. This would make it a legal requirement for the practitioner to inform the regulatory authorities as soon as practical.

Mr Voller said in clarification of “as soon as practical” that the business practitioner had to inform all parties and the regulatory authorities within five business days after his appointment.

New Clause
A second new Clause was introduced amending Section 1412(c)(i) of Act 71.

Mr G Selau (ANC) asked what the difference between “necessary” and “appropriate” was.

Mr Flip Dwinger, Director: Legal Services: CIPRO of the Department of Trade and Industry, said the Act prescribed what the practitioner must do. It did not prescribe how it must be done. Only what had to be done.

Clause 86
The Chairperson said concerns about SARS withholding records had been sorted out.

Clause 87
The word ‘egregiously” was deleted.

Mr Voller said that this concerned parties who had voted against the rescue scheme who might raise the issue that it was not just and equitable to themselves or that the remuneration for the practitioner was unreasonable, that is, too much. These parties could apply to court within ten business days for a court order setting aside the agreement on the grounds that the agreement was not just or the remuneration was unreasonable given the financial circumstances of the company.

Mr Smalle suggested that the business practitioner be on an equal footing with all other creditors and should not be ranked in priority order.

Mr Dwinger said that the practitioner had a preferred claim as it was unlikely that practitioners would accept the job if they were not given preferential treatment.

Mr X Mabaso (ANC) asked who employed the practitioner.

Mr Dwinger said the company passed a resolution and that it then found a practitioner.

Mr Alberts said the practitioners should be secure in the knowledge that they would be paid and suggested a clause to ensure that there was a reasonable prescribed fee.

Clause 89
Technical changes were made.

Clause 105
This was amended, as per Committee recommendation, to read that the Chairperson and Tribunal members serve a term of five years and subject to subsection 2(b) may be re-appointed for a second term.

Clause 109
The Committee agreed to this.

Clause 112
The Committee agreed to this.

Clause 113
Ms Idensohn referred to Section 218(1) and said that if there were contraventions of the Act that there would be consequences. Sub clause 1 was important and she had suggested that it should be reworded not deleted. The decision to retain the clause was the right one.
 

The Committee agreed to the reworded clause.

Clause 118
This dealt with Item 6 - par value shares. It clarified the conversion of par value shares. No new par value shares would be issued.

New Clause
A new clause after Clause 118, an amendment to Section 225 of Act 71 of 2008, was introduced. The wording “which may not be one year earlier than one year following the date on which the President assented to this Act” would be removed and it inserted: Section 225(2) stating: “Section 11(1)(a)(ii) and (iii) would come into operation three years after the date of commencement of the Act.”

Clause 119
Mr Smalle said that with regard to Section 11(1)(a)(ii), that the clause be flagged for further discussion subject to the Department’s investigation on SWIFT (Society for Worldwide Interbank Financial Telecommunication).

Mr Voller said that there were two issues, the question of foreign jurisdiction about symbols and the issue of SWIFT. The Department had SWIFT’s contact details, would meet with them and report back.
 
The Chairperson said the British Registrar of Companies had reported no problems in the use of symbols.

Mr Smalle noted Clause 83 as being an outstanding issue

Ms Kathy Idensohn commented that Section 136 dealt with what happened to existing contracts if a business rescue was instituted. Employment contracts were to be treated separately and remain unaffected. It was up to the business practitioner to suspend or cancel all or any part of company contracts conditionally or unconditionally. It was felt that this legislation was going too far. The amendment was for the practitioner to keep the power to suspend contracts but only for a limited period while the company was being rescued and subject to 35(a)(b) of the Insolvency Act. Section 35(a)(b) of the Insolvency Act dealt with special contracts, such as entered into on the stock exchange and public markets. Thus if a company went insolvent it would not affect its special market transaction contracts on Stock Exchanges. This in turn protected the integrity of the market and investor confidence.

Similarly when it came to cancellations of business contracts, only the court should be able to do this, with the court also being subject to the provisions of Section 35(a)(b).

The Committee agreed to this.

Mr Voller clarified an issue that had been overlooked, namely the Department’s response to Clause 55 on employer share schemes as per DOCUMENT 12. The Department confirmed that over and above what was written in the document entitled Written Responses to Comments on the Companies Amendment Bill, Department of Trade and Industry, dated 28 January 2011, the definition contained therein should be read with Section 2 of the Act. The amendment had been requested by the JSE.

The meeting was adjourned.